Investing in Industrial ETFs

Investing in Industrial ETFs

The industrial industry is vital to the global economy. Companies in the sector manufacture and distribute building products and machinery, provide commercial and professional services, and provide transportation services. Given the vital role industrial companies play in supporting the global economy, many rely on the economy to drive growth. So, when the economy slows, it can affect industrial stocks.

However, that’s not the case for all industrial stocks . The sector also includes companies that operate in the defense and aerospace industry and those that provide waste management, which are relatively recession-proof . Because of that, investors shouldn’t completely dismiss all industrial stocks when concerns about a recession arise.

We’ve seen how the economy and geopolitics affected the sector in 2022. On one hand, with inflation spiking, the Federal Reserve has started to raise interest rates to cool off the economy, which could affect economically sensitive industrial stocks. Given Russia’s invasion of Ukraine, however, defense stocks should benefit from increased defense spending.

The various factors affecting industrial stocks can make it difficult for investors to pick the right stocks that will benefit from the sector’s driving forces. One potential solution is investing in an exchange-traded fund ( ETF ) focused on the industrial sector. Some ETFs offer investors broad exposure across the entire industrial industry, while others focus on one aspect such as aerospace and defense. Here’s a closer look at some of the top industrial ETFs. Image source: Getty Images. 7 top industrial ETFs

There are more than a dozen ETFs focused on the industrial industry. Here are seven top industrial ETFs: Industrial Select Sector SPDR Fund

The Industrial Select Sector SPDR Fund is the behemoth among industrial ETFs, with more than three times the assets under management than the next largest industrial ETF. The ETF aims to track the performance of the industrial sector within the S&P 500 Index . The fund held 72 stocks as of early 2022. The ETF’s top five industries within the industrial sector were: Machinery : 19.4% of the fund’s holdings

Aerospace and Defense : 17.4%

Industrial Conglomerates : 12.8%

Road and Rail : 11.7%

Air Freight and Logistics : 8.2%

Given its focus on industrial stocks within the S&P 500, the ETF holds shares of the largest industrial companies in the country. Meanwhile, it allows investors to gain broad exposure to the top industrial stocks for an ultra-low ETF expense ratio of 0.12%. Those factors make it an excellent ETF for those seeking a low-cost way to invest in the largest industrial stocks. Vanguard Industrials ETF

The Vanguard Industrials ETF offers even broader exposure to the industrials sector. As of early 2022, the ETF held more than 350 industrial stocks. The fund’s top five industries within the industrial sector were: Aerospace and Defense : 16.9% of the fund’s holdings

Industrial Machinery : 10.3%

Industrial Conglomerates : 9.2%

Railroads : 8.1%

Electrical Components and Equipment : 7.2%

The ETF offers this broader sector exposure for a very low ETF expense ratio of 0.10%. These characteristics make the ETF an excellent option for investors seeking a low-cost way to broadly invest in the industrial sector. iShares U.S. Aerospace & Defense ETF

The iShares U.S. Aerospace & Defense ETF focuses on holding U.S. companies that manufacture commercial and military aircraft and other defense equipment. The ETF had 35 holdings as of early 2022, led by the following five industrial stocks:

The ETF offers broad exposure to the aerospace and defense industry, weighted toward the sector’s largest players. It also charges a reasonable ETF expense ratio of 0.42%. The fund’s features make it a solid option for investors looking to add exposure to the aerospace and defense industry to their portfolio. U.S. Global Jets ETF The U.S. Global Jets ETF provides investors with access to the global airline sector. It holds airline stocks and aerospace manufacturers from around the world. The fund had more than 50 holdings as of early 2022, led by the following five:The ETF enables people to invest in the entire airline industry. It has a modest ETF expense ratio of 0.6%. SPDR S&P Aerospace & Defense ETF The SPDR S&P Aerospace & Defense ETF is another industrial ETF focused on the defense sector. However, it has a narrower focus on the S&P 500 index. It also takes a modified equal-weight approach that provides unconcentrated exposure to the sector. As such, it had 33 holdings as of early 2022, led by the following five:The ETF charges a reasonable expense ratio of 0.35% to provide investors […]

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